What is a Health Care Reform Tax Penalty [Calculator]?

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You may already know that starting in 2014 most Americans are required to have health insurance under the Affordable Care Act, but did you know that individuals who do not have health insurance could face a tax penalty in 2015?

If you already have insurance through your employer, Medicaid, Medicare, or a private provider, you are already covered and will not receive a penalty.

If you don’t currently have insurance, there’s a window for enrollment – the government has given families and individuals from October 1, 2013 to March 31, 2014 to purchase health care plans through their state or federal Health Insurance Marketplace.

For those who do not plan on purchasing insurance before the March 31, 2014 deadline, the federal government has identified more than 30 ways to qualify for an exemption, including hardship cases. The IRS has a free online tool to determine if you’re eligible for an exemption. A complete list of exemptions is available at Healthcare.gov.

Be aware that for 2014, the annual one-time tax penalty will be $95 per adult, or one percent of your total income, based on your income. For uninsured children in your family, the penalty is $47.50 per child, with a family maximum of $285 for the year.

Because coverage is assessed on a monthly basis or prorated, you will only owe a portion of the total penalty for the months that you are uninsured. The health care reform tax penalty will be imposed on your 2014 tax return filed in 2015.

The annual penalty will increase each year.  For 2015, the annual penalty will increase to $325 per adult and $162.50 per child, with a maximum penalty of $975 per family (or roughly two percent of total income depending on family income). In 2016, the annual penalty will be $695 per adult and $347.50 per child, with a max of $2,085 per family, or about two and a half percent of total income depending on family income.

There are some individuals who will not be required to purchase health insurance and therefore will not be penalized, including people with income below the IRS requirements for filing taxes, those who qualify for religious exemptions and members of Indian tribes.

More questions about the health care reform?  Get your answers in the TurboTax community.

48 responses to “What is a Health Care Reform Tax Penalty [Calculator]?”

  1. I filed my taxes and Turbo tax indicated after filing that I may be able to be reimbursed 975 for the tax penalty of not having health insurance! I have health insurance, so I went in and amended the return to show that I have health insurance and there is no refund coming to me. Did I pay a penalty or not? Because I did owe and I did pay, but there is no form indicating that I paid a penalty. Also, the 975 in penalty would be based on 2015 not the penalty from 2014. This is very confusing and Turbo Tax should really look into a fix for this for 2015 or I’ll be hiring a tax person to ensure I don’t overpay. Please comment back! Unsure about how much I paid!!!!!

  2. I am doing my 2014 taxes and I am doing it online. I got to the insurance question. It asks if I have health care. I said yes. It asked if through obamacare, I said through my job. My refund dropped $500. I got penalized for having healthcare through my job.

  3. I have ssn,been coverage all year ,but my dependents doesnt,since they have itin number,do i have to pay penalty for them?

  4. I have full custody of my son and claim him as a dependent however hia father provides his health insurance. I realize i have to pay a penalty for my own lack of coverage but will also have to pay it for not insuring my son? He has insurance that doesnt seem fair

    • You yourself will have a penalty but your son because your husband provides his insurance will not be charged.

  5. I, as well as most hard working American citizens would definitely have health insurance if the premiums were within their budgets. Most of the plans have very high deductibles, which means you more than likely have to pay out of pocket, which is just like being non insured. And if you DO manage to find an affordable plan, try finding a Dr that accepts it. That’s when the fun begins, been there, done that.

  6. What if you have insurance under someone else thats paying for family coverage? Would u still get penalized if u dont have your own individual insurance?

  7. I am planning to claim my mom as a dependent. I have health coverage. Do I have to buy health insurance for my mom to avoid penalty? She is under 65 years old.

  8. The tax calculater is interestsing. I figured both my family of 2 Adults and 1 child no insurance penalty is $1200. Using the same income and only one adult in the family and not insured the penalty is $1300. Not sure how that works.

    • Hi Steve,
      I’m not sure what income you used so it’s hard to say, but I do know being married filing jointly vs single puts you at a different income threshold and your penalty is based on how much over the threshold you are. If you used the same income for married filing jointly and single being single with the same income would give you a much higher income that you are charged a penalty on.
      Thank you,
      Lisa Greene-Lewis

  9. I have both Medicare and a Medicare supplement plan. But my wife has not turned 65 yet. And we can’t afford her insurance. She will turn 65 in July of 2015. Will we have to pay the penalty?

  10. Im applying to go to an international university for my Master’s this year. I will leave in July so I don’t want to waste my tuition money to pay for Obamacare. Is that a risk? Does anyone know what will happen to me next year because I can’t afford to pay for health insurance this year?

  11. I can’t afford health care now. None of our employers provide insurance. Our insurance we were paying for last year was $220/mo for two of us, now the cheapest one I can find is $500/mo with much less coverage (our policy was terminated due to the new laws). We already cancelled our tv service last year to keep up with bills…so thanks, Obama, but that won’t help us pay the extra $280 a month (extra $3,360 per year) so we’ll save a total of $5,600 in one year after paying the $400 penalty for being uninsured in 2014. It’s a gamble on staying healthy that we now HAVE to take. We don’t have an option. Awesome.

  12. In good faith, last week, I enrolled on 2 health plans by phone. Once I had my health and dental plans in place, I found out it in a few days both plans were cancelled by the toll free number that I called. I paid by check by phone for my Humana Plan, only to find out my payment did not post to my account. My BC/BS payment for dental was also credited back to my checking account. I think this was all due to “Divine Intervention” since my premiums for the year would have been $1,260 for 2014 not counting my $3200 deductible. And since my hours at work have been reduced this week after the fact, it’s almost a “Blessing in Disguise” that I am not signing up for “Obamacare” You can call it “buyer’s remorse”. In retrospect, I understand now that this plan was totally unaffordable for me and I’ll gladly save up to pay the $175 fine next year when I file my taxes.

  13. Obama Care has to go !!! We can’t afford it and this penalty crap dosen’t make sense. Forcing people that can’t afford it in the first place is the most dumbest thing I have ever heard. I am from Canada but live in the U.S. for the past 9 years and I think that Obama needs to look into how they run the health care system in Canada. It’s FREE and you don’t pay a dime and you get a health card. The government pays for everything there !!!

    • If you think obamacare is expensive, wait until it is free. “Healthcare” is not free in Canada, and the “government” does not pay for it either. Pay more attention in economics class.

  14. There is a lot of confusion about the Obamacare penalty. The best place I found to calculate a possible fine is at http://obamacarefee.com

    The maximum fee is much higher than $285 and could be several thousand dollars so you need to find out ASAP, before March 31st

    • no, the fee is capped at the lowest bronze plan costs. Plus, the IRS cannot collect it other than to seize your refund. They are not allowed to place a lien on property or garnish wages.

      • If Barb’s info above is correct, then here is the solution: Taxpayers should adjust their taxes paid in 2015 so that they owe the FEDS a “small amount” for TAX DUE for 2015. Then how would the FEDS collect for the penalty if no refund is due?

  15. I was just appointed conservator and guardianship for my son because of his disability how can I claim him on my taxes

  16. The “individual shared responsibility”, better known as a tax/penalty isn’t being explained accurately.
    See the irs.gov site and read for yourself exactly how the penalty will be calculated.

    Portion on the penalty from the IRS website……..
    3. When does the individual shared responsibility provision go into effect?

    The provision goes into effect on Jan. 1, 2014. It applies to each month in the calendar year. The amount of any payment owed takes into account the number of months in a given year an individual is without minimal essential coverage or an exemption.

    Penalty portion from the article on usnews.com website………..
    “Most people think of it as an annual penalty,” notes Larry Levitt, a senior vice president at Kaiser. “But it is in fact a monthly thing, and you would pay a penalty for any month that you are uncovered.” However, a person may be without coverage for up to three months without triggering the penalty.

  17. How to avoid the penalty?? Quit you job, deplete your bank account then apply for government welfare. Not only will you not be penalized but health care for you would be basically free. Does anybody see where this Obama care crap is going???

    • And you would quit your job and live on welfare…why? Do you have fluid on the brain or something?? Welfare isn’t a free ride. A single individual gets (depending on the state) an average of $900 – $1000 a month in food stamps and welfare assistance. That’s 12k a year.

      Also known as POOR. At that income level you won’t get subsidies or even be REQUIRED to have health insurance.

    • you can just not pay it. The IRS cannot collect it via garnishment or liens (as they do for other tax debts) They can only seize your refund for payment

      • Do I fill in the 1040 form and just send it in with no money? My husband and I are both on Social Security and don’t work…we are 63…still too young for Medicare and can’t afford NObamacare….Our gross income is $42,000 a year.

  18. I am married but file separately. My husband and my son have insurance. I am the only one uninsured. does income include my husbands even though we file separately?

  19. I don’t know how the penalty is going to be calculated when the parent is uninsured (due to the expense of coverage) but the children are insured (the non-custodial parent takes care of their coverage). Are they going to ask for policy info for every person I the household?

  20. I’m not sure how the “penalty” is going to be calculated if the children have coverage but the parent does not (in a single-parent home in which the non-custodial parent pays the premiums -the custodial parent does not have coverage b/c after taxes, monthly bills, etc., there is only about $45 left per month. . .much less than the premiums). Are they going to ask for the policy info for every single individual?

    Does anyone have any suggestions?

  21. your calculator is crap. my husband and his child have insurance. myself and my child do not. We file combined, but the IRS can’t explain what our fine is going to be.

    • why doesn’t your husband add you & your child to his policy? he can add your child even if he is not the father

      • Because even though we are married he refuses to add me, it will cost him too much money from his paycheck. I pay for our sons insurance through the state, so now I need to know if both our incomes will be added together even though we file separately. I also am still in Chapter 13, that too is separate from my husband, which is the reason we file separately as well.

  22. Or so you thought. However, the Supreme Court (an utterly infallible entity to be sure) just ruled that the US Gov’t does have the power to “tax” inactivity, while also being careful to point out that the US Gov’t does not have the power to “compel” citizens to participate in trade or commerce. This argument, attempt at logic, and subsequent ruling is an affront to reason and logic.

  23. This is an interesting infographic. I did not know that the US was doing such things in its health care system.